The price represents roughly a 10 percent premium to Sears’ $29 billion gross domestic credit card receivables portfolio. While the transaction was approved by the board of directors at both companies, it is still subject to regulatory review and closing conditions.

“The whole profile of the company has changed,” noted Fitch Ratings fixed-income analyst Philip Zahn in a telephone interview. “They will eliminate their credit card business, but pay off most of their debt. So they’re left with a stronger balance sheet, but going forward, they’ll also be a more cyclical company as a pure-play retailer.”

Expected to close by the end of the year, the deal should net Sears’ pretax cash proceeds of about $6 billion, or roughly the sum of a $3 billion premium on receivables and approximately $3 billion of the retailer’s net invested capital.

Proceeds will be used primarily to retire debt, return cash to shareholders and for general corporate purchases. After the retirement of debt, the firm will have available between $4 billion and $4.5 billion in cash. Sears will carry approximately $1.5 billion of debt, net of cash reserves held for future paydown of remaining outstanding debt.

Once it’s shed the business, which last year produced sales of $5.67 billion and operating profits of $1.5 billion, Sears will proceed solely as a retailer.

Retail hasn’t been an easy business for many chains and department stores in recent months, and Sears has reflected the industry’s struggles with comparable-store sales declines of 1.8 percent in June and 1.9 percent in May.

Alan Lacy, chairman and chief executive of Sears, said in a statement the transaction would “create significant value for our investors by accelerating progress toward building a Sears that is completely focused on growing our core retail and related services business, further simplifying our organization, strengthening our financial position and returning substantial proceeds to shareholders.”

Sears has been trying to turn around its 870 full-line stores for some time, though. Last year brought with it many changes in the store layout and the product on the floor. The stores were retooled, direct merchant Lands’ End was acquired for $1.9 billion and Covington, a private label designed for the whole family, bowed in the fall.

More recently, in April, Mindy Meads, who hailed from Lands’ End, took the helm of apparel, succeeding Kathryn Bufano as executive vice president of softlines.

In 2002, Sears’ retail operations produced sales of $35.7 billion, which made for operating income of $1.16 billion.

Fitch kept its credit rating on Sears at “BBB-plus” with a negative outlook. “They’re obviously in the middle of trying to turn around their full-line stores,” said Zahn. “They’ve made some progress. They have more to do. That’s the task at hand in what is still a tough retail environment.”

Sears will benefit from the deal by paying down its debt, which was mostly related to the credit card business anyway, and by making the company easier to understand, but will also lose a “fairly profitable business,” he said. “In our view, it’s kind of a wash.”

On the other hand, Standard & Poor has cut its corporate credit rating on Sears to “BBB” from “BBB-plus” and removed the firm from its previous status of CreditWatch with negative implications.

“The downgrade reflects the absence of this historically important foundation to the credit rating and its operating income…and a greater reliance on a retailing business that has a very challenging future,” said debt analyst Gerald Hirschberg in a statement.

“The rating continues to reflect significant challenges for the retail business, where revenue growth and cost control will remain key issues,” he added. “Moreover, a struggling economy, an intensely competitive retail environment, and lagging consumer confidence will make improvements in the retail business difficult to achieve.”

Additionally, Citigroup and Sears entered into a long-term strategic alliance, under which Citigroup will provide credit and customer service benefits to Sears’ proprietary and Gold MasterCard holders. Sears expects to receive roughly $200 million in annual performance payments from Citigroup based on items such as new account and credit sales generation. Also, Sears is looking for the deal to produce savings of more than $200 million as Citigroup will absorb costs associated with its 0 percent financing program.

Sears’ domestic credit card business includes 59 million total accounts, 23 million of which are active. The program weighs in as the eighth largest in the U.S.

Sears said that the roughly 8,300 employees of its credit business will become part of Citigroup.

In March, Sears called for suitors for its credit card business, which had been through a rocky period last fall when the firm registered a large, unexpected credit-related charge that dragged down earnings. Lacy subsequently dismissed one of its top executives over questions of personal credibility in terms that led the executive, Kevin Keleghan, to file a defamation lawsuit against Lacy, his former boss.

Last week, as reported, Keleghan, received approval to proceed with his defamation lawsuit against Lacy, but the circuit court judge allowed only two of Lacy’s statements to proceed to trial, one asserting that Keleghan “wasn’t forthcoming about the issues” in the division’s rising delinquent accounts and that he had “become a barrier” to the ceo’s ability to obtain accurate information about the credit card business.

Sears is expected to report second-quarter earnings results on Thursday.

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